So frequently we're quick to place a price on what financial freedom methods to us. Many people say "I wish to be a millionaire - so I need one million dollars in the bank" ;.Or, "If I made $200,000 per year, I could be financial free." So set aside a second and think: what is my personal financial freedom figure?
Wikipedia defines Financial Independence as "a term generally used to spell it out their state of getting sufficient personal wealth to live indefinitely without having to work actively for basic necessities." (Note that Wiki doesn't define Financial Freedom - it requires one to its Wealth definition.). Have you ever actually sat down and really identified simply how much wealth you would have to reach financial freedom ? Does it mean a specific amount in the financial institution? Does it demand a certain income per month? Well, the answer varies for all of us, and will definitely depend on your own stage of life. Keep reading for a few items to ponder when wanting to develop your Financial Freedom Figure.
Let's look back at two parts of this is: having sufficient personal wealth to live indefinitely without having to work actively.
By the time you're 65, you might be earning enough government pensions to not actively work until your last days on earth. Even yet in your twenties, you might be become disabled, and government assistance and disability insurance could cover your basic necessities for life. So, seniors and people on disability support technically are financially free. Their financial freedom number is based on a specific amount of money per month in government and disability pensions. But realistically, we know that anyone on a government pension or disability would hardly jump up and down and say "I'm free, I'm independently wealthy, and I'm rich!" These folks may have their month expenses covered, but unless they have some dough reserves as well, they're restricted to spending only what their pensions bring in. For an individual within their 80's, this may be just fine - their expenses are low, they aren't providing for a family group anymore, and may not really have a spouse to care for. But however, they might have huge medical expenses and care-home expenses. So unless the senior includes a good net worth, he might not be financially free.
The twenty-something who's on disability will probably have a tougher time saying he's financially free. He may be single now, but whenever a spouse and children come his way, so does the mortgage payments and bank card bills. And the thought of living the next 50 years on a set, minimal income is not totally all that appealing. Again, he'll be forced to spend only what his disability pension brings in. But, technically, he has reached financial independence.
Is this that which you thought financial freedom would look like? Well, for a few people it will; provided that all of your basic needs - food, water, shelter - are met, shouldn't you be happy? Or are you on one other end of the spectrum, thinking of boats, cars, vacations, and fancy clothes whenever you dream of financial freedom ?
For those who are leaning towards the "fancy" side of financial freedom , I ask you this: Could you not have those nice things while you work? Needless to say you can. Do you feel rich whenever you accumulate those activities? Probably, but it depends on in the event that you used debt to get them, or you covered your luxuries with cash. You could feel rich by paying cash, but if you still need to work the next year to save up enough to buy another luxury, are you really free? And in the event that you used credit to get your items, then you may feel rich when using the item, but not too rich whenever you sit back to pay for your bank card balances.
Being financially independent is more of a lifestyle quality than it is just a quantity. You will need to figure out what standard of living you desire to attain first, and then you can certainly start calculating a figure to guide your chosen lifestyle. And your lifestyle quality will change through-out your life. You could consider yourself financially free during your child-raising years if you've were able to either save enough in cash or earn enough in passive income each year to ensure that you may not need to visit a job every day during your children's first five years of life. Or even your freedom comes from having the wealth accumulated to ensure that in your 40s you can take 5 years off to come back to school and get a university degree. Maybe financial freedom can be as simple as renting out your residence for $2000 per month for per year, and moving to a foreign country to live on less compared to $2000 per month your passive income rental generates.
Did you think of these scenarios when you considered financial freedom ? Many people do not - they simply think of retirement at age 65, or winning the lottery. A lot of people expect that they may always work until retirement, and few people think of generating passive income outside of their jobs.
Why can't we do both? And why can't we be financially free for only per year, five years, or even six months? We are able to, but we're programmed to believe "forever" and "never work again" ;.I'd sure be happy and feel wealthy and free if I were to say "Yes, I stayed acquainted with the children while they grew up, because I was financially free" or "I spent per year in Costa Rica learning Spanish, because I was financially free for the year" ;.So I get back to work after those events in my life - big deal. At least I possibly could say I reached financial independence before my meager government retirement pension kicks in, and my hips or heart gives out. And you can bet your savings account that after being "free" for just about any period of time, your appetite to generate more passive income will be ferocious: more passive income means more freedom.
So, what is your Financial Freedom Figure? Don't focus on the numbers, but with your heart. What lifestyle do you really want to live?
Just how to Save Your Finances is an internet site providing information, products, and insights to the journey of increasing your net worth, and attaining the goal of financial freedom. Please join in the conversations at https://www.centerforworklife.com/.
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